Dip in CEO pay at some blue-chip firms

THE drop in corporate profits last year hurt the pockets of the chief executive officers (CEOs) of some blue-chip companies, who received a smaller pay package than in 2010.

A general climate of increased scrutiny on executive pay could also have played a part as companies became more careful in rewarding their head honchos, added consultants.

A compilation of the remuneration packages of the head honchos of 10 Straits Times Index (STI) companies showed that six of them earned less last year compared with the year before. These large blue chips have a financial year ending on Dec 31 and they recently released their annual reports detailing their CEOs' pay.

The pay for one CEO was unchanged, while three of them saw pay increases, based on the disclosures.

The annual reports generally did not specify the reasons for the changes in pay, but the falls were mostly due to the CEOs receiving lower bonuses rather than a lower fixed pay.

The size of bonuses may have been affected by falling profits at companies.

The combined earnings of Singapore-listed firms last year edged 3.8 per cent lower - dropping for the first time since 2008 as the stuttering global economy and natural disasters overseas battered bottom lines.

Companies' performance will have an impact on the performance bonus of their CEOs, said Mr Kwong Hui Hen, research director at consultancy Freshwater Advisers.

'Changes to their remuneration may be attributed to the financial performance, whether the companies have done well against their target,' he added.

An example of a CEO being paid less is United Overseas Bank's Mr Wee Ee Cheong, whose pay last year was in the range of $6.5 million to $6.75 million.

This was a drop of an estimated 19 per cent from his pay package of between $8 million and $8.25 million in 2010.

Bonuses were lower for Mr Wee last year, when they made up 80.7 per cent of his pay package. In 2010, bonuses made up 85.2 per cent of his remuneration, with salary, directors' fees and benefits in kind making up the rest of the package.

Last year, the bank's net profit dropped 14 per cent to $2.32 billion.

At property giant CapitaLand, chief executive Liew Mun Leong received a package of $5.63 million last year - compared with $6.76 million in 2010 - as his bonuses fell. The property giant's net profit last year was $1.06 billion - a 25.8 per cent drop from a restated $1.43 billion. Revenue was also lower.

Sembcorp Marine CEO Wong Weng Sun's remuneration was $7.6 million, a fall from $10.97 million, and this was also due to a lower bonus. The rigbuilder's net profit dropped 13 per cent to $752 million from $860 million in 2010, and revenue declined as well.

'Compared with the previous financial year, companies like CapitaLand and Sembcorp Marine saw a decline in both revenue as well as profit before tax,' said Mr Kwong.

'The lower financial performance likely leads to a lower bonus for the CEO.'

Other factors could also have contributed to the lower payouts, said Mr Kevin Ong, director of executive compensation in South-east Asia at human resource consultancy Towers Watson.

'In the new reality, there are more factors that the remuneration committee (of a company) will consider when structuring executive pay. Back then, when everything was going well, they spent less time on this,' he said.

'Now, besides looking at whether the financial performance gels with the reward, they must also look at the environment. There's a lot of talk and scrutiny on executive pay, from stakeholders, investors and the public.'

Mr Ong added that remuneration committees will nowadays be 'more deliberate in their discussions, looking at stakeholders' views, the regulatory environment and the business strategy'.

But it is not bad news for all CEOs. For example, Mr Piyush Gupta from DBS Group Holdings earned $8.08 million, a rise from $7.35 million in 2010.

This came as the group's net profit rose 15 per cent to a record $3.04 billion last year - crossing the $3 billion mark for the first time. DBS became only the second Singapore company after SingTel to record $3 billion in earnings in one year.